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October 20 marked one year of the Bambang Yudhoyono-Jusuf Kalla government. Commentators in Jakarta were cautious in their evaluation of the performance of the first fully elected Presidential team - mostly giving them a mark of six or seven out of ten. Yudhoyono (SBY) had promised much, yet appeared to have delivered relatively little in terms of reform or clearly measurable outcomes. Several political rather than 'professional' cabinet appointees seemed to be performing poorly, especially in the 'economics' and 'social' portfolios. The decision-making process was painfully drawn out, and the President seemingly too fond of seeking a political consensus, rather than taking decisive action when urgently required.
Yet, on the other hand, it is hard to point to glaring mistakes. SBY and Kalla appeared to have fashioned an effective 'duumvirate', where the Vice President has played a key role in decision-making, quite unlike the Presidential teams of the past. The government had developed a working relationship, albeit strained, with the parliament, not least due to Kalla's political skills as head of Golkar. The team was not overwhelmed by several major crises that emerged during the year: the Aceh tsunami disaster, a continuing challenge posed by radical Islam and the terrorist threats, and a fragile budget under threat from the dramatic increases in world oil prices in the second half of 2005.
Progress in attacking corruption, one of SBY's key election promises, has mirrored the government's patchy record. On the one hand, several high profile individuals were put behind bars Abdullah Puteh the former Aceh governor is a notable example. Dr Nazaruddin, the former head of the powerful electoral commission (KPU) has been detained on corruption charges, and the Chief Justice is under investigation for corruption in a case involving President Soeharto's step-brother. Many other corrupt regional leaders were removed from their posts and are under investigation. The government gave added support to the Anti-Corruption Commission (KPK), and the National Audit Body (BPK), and vowed to bring a resolution to the controversial murder case of human rights activist Munir. On the negative side, however, no central political, military or business actors in the Soeharto regime had been brought to trial for corruption, and the Munir case seemed destined to miss the big fish or fishes responsible, possibly within the National Intelligence Agency. Systemic reform of the judicial system and the civil service, at the root of the problem of corruption, has been painfully slow.
While the government was criticised for lack of progress in reconstruction in Aceh in the months after the December 26 2004 disaster, the Aceh peace accord (achieved in August 2005) appears to have been a major breakthrough. Not only had peace in Aceh been one of the President's key election promises, but successful longer term reconstruction and development of the province is surely dependent on reaching a compromise with the Free Aceh Movement.
The second round of Bali bombings, on October 1 this year, although much less severe than the attacks almost three years earlier, brought international attention once again to the continuing threat of terrorism within Indonesia from radical Muslim groups. While this was the only major attack on westerners in the first year of the SBY government, continuing violence in Poso, Central Sulawesi and other areas, and failure to capture key fugitives Dr Azhari and Noordin Top, indicate that the government still has much to do. Unfortunately, public exhortations from Australia and elsewhere for the banning of Jemaah Islamiyah, JI, the organisation seemingly behind much of the violence, have made it harder for the SBY government to deal with the problem, as it was forced to defend itself against criticism of foreign interference.
The oil price issue, like developments in Aceh, demonstrated some of the best and worst features of the SBY administration. The government, and in particular the President, seemed to dither for several months, as oil prices rose to record levels during the second half of 2005, leading to a blow-out in the already heavy subsidies mostly going to middle class consumers of petroleum products. The rise in subsidies increasingly threatened a healthy economic recovery in 2004-5, and also jeopardised development budget allocations to education and health. Further, inaction contributed to investor uncertainty and increased pressure on the rupiah which hit a low of Rp11,000/US$ in September, and placed further pressure on inflation as the price of imported goods rose.
However, when the government finally acted to raise domestic oil prices on October 1, the increase was far larger than expected (above 100%, on average, as against a predicted 50% increase). The action seems to have allayed fears of investors and providing an indication that when the government decided to act it could do so with conviction, despite considerable public opposition.
What does the record of the first year imply for the coming twelve months? Two interpretations are possible. One would be that the government will continue to muddle through, making some important decisions but being politically too weak to decide on others, and failing to face many of the fundamental political and development challenges. An alternative assessment is that the first year has been an important learning period and phase of consolidation for the SBY-Kalla team, as they seek to forge political alliances and gain the public confidence necessary for more basic reforms.
Whether the President and Mr Kalla make some changes to key cabinet positions (a move viewed by some as central to success in the reform agenda), may provide some indication as to which interpretation is closer to the mark. Many observers in Indonesia are awaiting such a decision in the first weeks of SBY's second year at the helm.
WATCHPOINT: Will there be a cabinet reshuffle and what might this indicate for the year ahead?
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AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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